Texas Tech University has implemented an innovative loan program that has
yielded tremendously helpful outcomes for student persistence. In the following
interview, Dr. Ralph Ferguson, associate dean of the Graduate School, discusses
the Gelin Emergency Loan program and he comments on the importance of engaging
in dialog with students about their borrowing histories.
Explain the micro-lending and emergency loans utilized by Texas Tech.
What byproducts have emerged as a result of this offering?
At Texas Tech, we offer what is called the Gelin Emergency Loan. It was set
up several years ago by the family of Mr. Carl S. Gelin, who donated $1 million
to graduate school. The motivation behind this gift was Mr. Gelin’s experiences
as a young man looking to pursue graduate education at Texas Tech. At that
time, he was in need of assistance and frustrated at the lack of options, and
sees a similar sentiment reflected in today’s student population. The Gelin
Emergency loan was designed to help students with emergency medical or family
problems, food, shelter or other unanticipated needs. Sometimes, the monies are
requested for research if students do not receive a grant and are forced to
borrow funds to support their investigation.
The emergency loan is offered in several denominations: $500 or less, or
between $500 and $2,500. All loans are provided at zero interest so long as the
student continues to pay on time. Students have up to five years to pay off
their emergency loan. What is nice about this loan offering is that the rate of
reimbursement is low and the payments are entirely manageable.
A noticeable byproduct of the Gelin Emergency Loan is increased dialog with
students in regards to their educational borrowing, use of credit cards and
financial situations. Students come in and we have the opportunity to talk to them
about where they are with student loans, as most graduate students are taking
out additional student loans on top of the debt they’ve likely accumulated at
the undergraduate level. This interaction is extremely important because
borrowing for education is commonplace with many students, yet they often do so
without considering that the funds must eventually be paid back. Similarly,
some students choose to utilize credit cards to finance their graduate
education, pushing aside the fact that they must also repay those monies.
The majority of the population that requests the Gelin Emergency Loan feel
up against the wall with a healthcare or academic issue, or due to a
mismanagement of funds. The loan offers relief for students, but also provides
a platform through which we can address their situation in the context of the
big picture―whether the money will help them succeed and graduate. Graduate
students often have to leave programs due to financial hardships that require
them to work, after which time they come back and reapply. Not only is the
reapplication process a hassle, but those students that leave for over six
months often have their loans called and they must begin repaying their debt
along with accumulating more funds to support completion.
Many issues come into play with students in need of an emergency loan, and
in our case, we are in the unique position to counsel and assist them with
money management strategies to prepare for life and to achieve that benchmark
moment of graduation.
Would you consider the Gelin Emergency Loan and the accompanying
financial planning conversations a retention technique?
Yes, I would definitely consider the offering and ensuing dialog a retention
technique even though this was not the initial thinking when we implemented the
program. I’m a manager and financial person, so my initial thinking was that it
would be irresponsible and illogical to loan more money to students who are
already heavily in debt. However, after talking to the first group of emergency
loan recipients, it became clear that this could promote awareness of students’
personal history of academic borrowing. We realized that students were
overlooking a key consideration of borrowing—the average starting income in
their chosen discipline. For instance, a recent graduate with an English major
may teach in the public school system and their starting salary may range
between $25,000-$35,000; it is conceivable that gross salary may be taxed
approximately one-third. Relocation cost may increase student debt and if they
are facing repayment of a $25,000-$35,000 loan, most find their debt
unmanageable after meeting obligations.
Another factor to consider is that most students at a university meet and
marry students at that university, so if your companion has $40,000 in debt and
you do as well, you are starting your lives together almost $100,000 in debt or
more depending on credit card use. We sit down with students at Texas Tech and
say “Here’s where you are and this is what it’s going to take to get you out of
here.” Often we will deter students from the emergency loan and encourage them
to try to persist on what they have—some can and some can’t. All we want to do
is offer responsible advice and enlighten students to the aspects of their debt
that they may have overlooked.
What implications does the current state of student borrowing have for
the future of higher education?
More and more, we are seeing students come in whose parents are still paying
off students loans. I recently read an article that reported that students are
indentured to student loan debts for upwards of 25 years. Students are even
going so far as to change majors into a difference discipline, considering that
in the typical service positions—teachers, social workers, and the like—a good
chunk of meager learnings will go toward paying off debts rather than enjoying
being an educated, middle-class individual buying a home and building a future.
Fear of unmanageable debt versus salary ratio will eventually mean fewer people
in public schools teaching future generations and fewer social service workers
due to earning potential. Debt incurred by education will have a greater
influence on academic study in the future.
We have now passed legislation that increases the degree of difficulty for
students to bankrupt their student loans, an outcome resulting from a high
level of abuse of that opportunity. On average, students are borrowing about a
$100 billion annually and we’re graduating between 3-6 million students, 60
percent of whom have reasonably high student loan debt. We need to ask
ourselves if we want to continue this process. Prior to 1984, there were more
grants and fewer loans. After the reauthorization bill of 1984, education was
deemed a personal good rather than a public good, and students were encouraged
to borrow more while the grant systems began to scale back.
We’ve been graduating students with this high level of debt for the last 20
to 30 years, and its taking them longer and longer to enjoy the fruits of their
education. Universities continue increasing tuition costs, requiring students
to borrow more or work full- or part-time to stay in their academic program, a
reality that could negatively affect persistence. It is truly profound what
impact it can have to counsel students on debt and borrowing early to address
their financial situations now.
The trends in student borrowing signify a problem—if costs continue to rise
and debt continues to mount, my concern is that we might see fewer students
going to graduate school. For a market economy, that’s a bad thing. When you
look at community leaders across the nation in both organizations and public
service, the great many have higher education—master’s degrees, PhDs, law and
medical degrees. Also, the fear is that the underrepresented populations will
have fewer opportunities to pursue higher education should the costs become too
intimidating. It is also important to consider that this dilemma will
potentially cross all ethnic lines and rollback education achievements among
debt-averse populations. People with graduate degrees are excellent wage
earners and good tax payers, and they generally provide products that enrich
communities in a more profound way than those with undergraduate degrees.
Graduate education encourages critical thinking a key attribute of leaders. It
would be a tremendous shame to lose the diversity in this population of leaders
due to dollars and cents, and because households
are less able to afford college.
These are implications that we must anticipate down the line—but they’re
beginning to happen now. We need to consider the ramifications of the current
system—if students need to borrow more and more, what does that mean for the
future? Do we want to set up a situation that will solely allow people with
privileged resources to access universities and get a degree? It’s important to
consider that public education was put in place by the founding fathers because
an educated population is a prerequisite for a participatory democracy and
market economy. Education, in reality, is a public good, and therefore should
be accessible to all students.
Dr. Ralph Ferguson manages the academic affairs of more than 4,000
domestic and international students at Texas Tech University. Dr. Ferguson is
an effective advocate for programs that enrich the quality of undergraduate and
graduate experience, and he speaks frequently to groups about the impact of the
rising cost of education, personal financial planning and debt, globalism, and
disfranchisement. Dr. Ferguson holds a Masters in Public Administration from
the University of Southern California and a doctorate from Texas Tech
University in Personal Financial Planning (CEED).